Joint Tax Filing Reponsiblity
In 1997 my ex-wife and I filed a joint tax return and owed a tax amount of $5200.00. We never paid this money and over the years it had accumulated interest and penalites and had totaled up to $11,000.00. In 2000 we divorced and 2001 I filed bankruptcy, she chose not too. My assets paid $6600.00 towards this filing, and they IRS kept my individual return for 2001 and 2002 for a total $3500.00 along with her return of $3900 from 2001. They have sent a check to us for an overpayment of $3000.00.
This divorce decree does not indicate which of us was responsible for this debt making us both 50% liable. My question is? She has only paid $3900 towards this $5500 (1/2 of the total amount) do I have a case? Can I keep this money? She has not paid 1/2 to get 1/2 of it back....thanks for your input!
1 Answer from Attorneys
Re: Joint Tax Filing Reponsiblity
There are several issues here.
First is the question of whether the IRS had the right to grab your refunds after your bankruptcy. The tax was for 1997, presumably due and filed in 1998. You filed bankruptcy in 2001, three years later. If you filed your petition more than three years after the due date of the tax return (and more than 2 years after the return was filed, and more than 240 days after the tax was assessed), your liability for the 1997 income tax was discharged in your bankruptcy. This means that the IRS had no right to take your 2001 or 2002 refunds -- they are "post-petition" property. You can file a refund claim and get the money back, since you owed the IRS nothing at the time they took your money. Your ex-wife does not have the benefit of a bankruptcy discharge, and the IRS is perfectly within its rights in keeping her money. However, if you filed your bankruptcy petition prior to three years after the due date of the 1997 return, the tax debt would have survived and the IRS would have been right in keeping your subsequent refunds.
The second question, which turns on the answer to the first question, goes to the ownership of the refund check. If the tax debt was discharged as to you, then this is your money (and in fact they owe you even more). If the tax debt was not discharged, then both of you continued to owe it jointly and severally, and you would have to work it out with her on the 50/50 basis you suggest, or get the divorce court to determine who gets the money. So let's hope your bankruptcy petition was filed in late 2001 and that the 1997 tax was therefore discharged. If that is the case, we would be able to get the IRS to re-issue the refund check, and indeed to pay you the rest of the money they improperly took from you.
If you want more information on the discharge of tax debts in bankruptcy, see the journal article on this subject that I wrote for the Maryland Society of Accountants. It is in the articles section of my website, at www.bjhaynes.com. Good luck, and let us know if we can assist you.
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